Stan Had a Basis in His Partnership Interest at the Beginning

question 12

Multiple Choice

Stan had a basis in his partnership interest at the beginning of last year of $30,000. There was no change in partnership liabilities during the year. His share of the partnership's ordinary loss last year was $40,000 and the partnership had no separately stated items. This year, Stan has a distributive share of ordinary income of $30,000. The taxable income from the partnership reported on Stan's personal income tax return this year (ignoring the at-risk and passive activity loss limitations) is

• A)$10,000 ordinary loss.
• B)$20,000 ordinary income.
• C)$30,000 ordinary income.
• D)$40,000 ordinary income.

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Definitions:

Cash Proceeds

The total amount of cash received from a transaction, such as the sale of an asset or a business operation.

Market Rate

The prevailing price or interest rate for goods, services, or securities in a particular market at a given time.

Interest Payments

Regular payments made to lenders as compensation for borrowing money, typically calculated as a percentage of the principal.

Par Value

A nominal value assigned to a share of stock as stated in the corporate charter, unrelated to its market value.